About Me

Saturday, May 28, 2016

* This is my article for this monthly magazine in Kathmandu, April 2016 issue.

Economic expansion
in South Asia

South Asian economies are a picture of high diversity in
human and natural resources. While India has 1.3 billion population, Maldives
and Bhutan have a combined population of only 1.2 million people. And while
Nepal and Bhutan are high up in the sky, Maldives and many Sri Lanka cities are
just a few meters above sea level.

It is this diversity that provide South Asian economies good opportunity for growth and
modernization. There is only one Himalayan mountain range in the planet and they are in the region. The beach
resorts of Maldives and some in Sri Lanka are world class. And more needs
to be done, like the infrastructures to develop
modern ski resorts and cable rides in the
Himalayas in the future need to be laid out now. The need for more airline
liberalization and competition, airport modernization and electricity supply
stabilization, should be put in place too.

India being the lead economy in the region has been
growing fast in recent years. Despite its billion plus population, it is able
to expand the per capita GDP income rather fast. Maldives and Bhutan too grew
well although their small population is an important explanation why the per
capita income expanded faster. Pakistan, Bangladesh and Nepal managed to expand
the per capita by only 2x to 3x.

To adjust for inflation and high pricing in many rich
countries, the purchasing power parity (PPP) valuation of country GDP is used
by many economists and foreign aid agencies to make a more comparable
estimation of GDP sizes and per capita income.

Pakistan and Nepal managed to double the per capita
income of their people in two decades,
while their neighbors saw a 3x to 4x economic expansion over the same period.

Source: same as above

A number of South Asian economies are not liberalizing
fast enough. That is displayed by rather
low expansion of their GDP sizes.

In comparison, four South East Asian economies that
liberalized only over the past two decades, and liberalized fast enough, have experienced
GDP expansion of 5-6 times in just two decades. These are Cambodia, Laos, Myanmar
and Vietnam (CLMV).

Speeding up the pace of trade and investments liberalization
allows quicker reallocation of resources – people, capital, technology, land –
to sectors where they are most needed. Price inflation signals people where
they will be compensated higher, as workers, managers or entrepreneurs.

Freeing up markets will give individuals and households,
businessmen and entrepreneurs, the opportunity to quicken the pace of
innovation, product and price competition. Free trade and free market for
people means the freedom to sell their products or their labor and skills to
other people who can compensate them higher. It means freedom of people to
reject goods and services that are of inferior value and very high prices, thus
forcing people to continuously improve their products and services, improve
their skills, talents and marketing strategies.

Free market is pro-poor and pro-business. More businesses
means more jobs available for the people, which can later translate to better
opportunities to become start up entrepreneurs and job creators later.